Judge Amy Berman Jackson of the District of Columbia District Court on Tuesday dismissed as moot American Clinical Laboratory Association’s (ACLA) suit against the United States Department of Health and Human Services (HHS) secretary that challenged a 2016 Medicare reimbursement rate regulation because of a 2018 rule remedying the plaintiff’s original concern.
The plaintiff filed suit in 2017 against then-HHS Secretary Alex M. Azar, who since has been substituted as defendant by newly confirmed Secretary Xavier Becerra, arguing against a regulation that Azar promulgated in June 2016 to implement the provisions of the Protecting Access to Medicare Act (PAMA) of 2014. PAMA sought to level Medicare reimbursement rates with those paid by private insurers for clinical laboratory tests through a “market-based approach,” pursuant to 2013 data found by the Office of Inspector General showing that Medicare had been paying 18-30% more for lab tests than private insurance payors, the court explained.
ACLA took issue with the 2016 rule’s definition of “applicable laboratory” to be one that “bills Medicare Part B under its own NPI,” according to the act. An NPI, or national provider number, is a billing number that HHS assigns to health care providers for submitting Medicare claims.
Such applicable labs would be required to report to HHS every three years how much money they receive in reimbursements from private insurance companies, and the HHS Secretary would use the aggregate private payor data to determine the Medicare reimbursement rate for the same lab tests. Certain “low volume or low expenditure” labs were exempt from reporting their private insurer payouts, the court noted.
The plaintiff contended that the 2016 rule’s definition of applicable labs was “arbitrary and capricious” because it “excluded significant numbers of hospital laboratories that provide outreach services from the Secretary’s data collection … because most hospital laboratories bill under their hospitals’ NPIs, rather than their own,” the court explained.
The court dismissed the initial filing for lack of subject matter jurisdiction, which the plaintiff appealed; however, on Nov. 23, 2018, the HHS Secretary issued another rule that revised the “applicable laboratory” definition to include “hospital outreach laboratories” that use a billing method used by hospitals for non-patient lab services.
Despite the new rule, the D.C. Circuit remanded the matter for the district to consider the merits of the plaintiff’s original “arbitrary and capricious” allegation, and the plaintiff moved for summary judgment, followed by a cross-motion by the HHS.
The court could not find a “live controversy” that would prevent the suit from being moot, given that the 2018 rule addressed the plaintiff’s concerns about the 2016 rule. The only other available remedy would be backpay for any past reimbursements that were calculated using the 2016 rule’s definition, which would have changed the pay rate, the court noted.
“But PAMA provides that ‘payment amounts under this section shall not be subject to any adjustment (including any geographic adjustment, budget neutrality adjustment, annual update, or other adjustment),’” according to the court. “So even if the Court were to rule in plaintiff’s favor on the merits, it could not order the agency to revise any payment amounts.”
ACLA is represented by King & Spalding LLP.
